INVESTMENTS

3 Months Ended

Mar. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Investments

INVESTMENTS

Fixed Maturities and Equity Securities

The following table provides information relating to fixed maturities and equity securities classified as AFS:

Available-for-Sale Securities by Classification

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI (3)
	(In Millions)
March 31, 2017:
Fixed Maturity Securities:
Public corporate	$	12,699	$	690	$	72	$	13,317	$	—
Private corporate	7,147		278		54		7,371		—
U.S. Treasury, government and agency	10,675		237		582		10,330		—
States and political subdivisions	419		63		2		480		—
Foreign governments	334		29		8		355		—
Commercial mortgage-backed	373		21		53		341		4
Residential mortgage-backed(1)	279		18		—		297		—
Asset-backed(2)	43		15		1		57		3
Redeemable preferred stock	502		47		1		548		—
Total Fixed Maturities	32,471		1,398		773		33,096		7
Equity securities	174		1		—		175		—
Total at March 31, 2017	$	32,645	$	1,399	$	773	$	33,271	$	7
December 31, 2016:
Fixed Maturity Securities:
Public corporate	$	12,418	$	675	$	81	$	13,012	$	—
Private corporate	6,880		215		55		7,040		—
U.S. Treasury, government and agency	10,739		221		624		10,336		—
States and political subdivisions	432		63		2		493		—
Foreign governments	375		29		14		390		—
Commercial mortgage-backed	415		28		72		371		7
Residential mortgage-backed(1)	294		20		—		314		—
Asset-backed(2)	51		10		1		60		3
Redeemable preferred stock	519		45		10		554		—
Total Fixed Maturities	32,123		1,306		859		32,570		10
Equity securities	113		—		—		113		—
Total at December 31, 2016	$	32,236	$	1,306	$	859	$	32,683	$	10

(1) Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

(2) Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

(3) Amounts represent OTTI losses in AOCI, which were not included in earnings (loss) in accordance with current accounting guidance.

The contractual maturities of AFS fixed maturities at March 31, 2017 are shown in the table below. Bonds not due at a single maturity date have been included in the table in the final year of maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-Sale Fixed Maturities

Contractual Maturities at March 31, 2017

	Amortized Cost		Fair Value
	(In Millions)
Due in one year or less	$	1,564	$	1,584
Due in years two through five	7,954		8,381
Due in years six through ten	9,142		9,280
Due after ten years	12,614		12,608
Subtotal	31,274		31,853
Commercial mortgage-backed securities	373		341
Residential mortgage-backed securities	279		297
Asset-backed securities	43		57
Redeemable preferred stock	502		548
Total	$	32,471	$	33,096

The following table shows proceeds from sales, gross gains (losses) from sales and OTTI for AFS fixed maturities during the first quarters of 2017 and 2016:

	Three Months Ended March 31,
	2017			2016
	(In Millions)
Proceeds from sales	$	414		$	389
Gross gains on sales	$	19		$	19
Gross losses on sales	$	(20	)	$	(21	)
Total OTTI	$	—		$	(17	)
Non-credit losses recognized in OCI	—			—
Credit losses recognized in earnings (loss)	$	—		$	(17	)

The following table sets forth the amount of credit loss impairments on fixed maturity securities held by the Company at the dates indicated and the corresponding changes in such amounts.

Fixed Maturities - Credit Loss Impairments

	2017			2016
	(In Millions)
Balances, beginning of period	$	(190	)	$	(198	)
Previously recognized impairments on securities that matured, paid, prepaid or sold	43			34
Recognized impairments on securities impaired to fair value this period(1)	—			(17		)
Impairments recognized this period on securities not previously impaired	—			—
Additional impairments this period on securities previously impaired	—			—
Increases due to passage of time on previously recorded credit losses	—			—
Accretion of previously recognized impairments due to increases in expected cash flows	—			—
Balances at March 31,	$	(147	)	$	(181	)

(1) Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.

Net unrealized investment gains (losses) on fixed maturities and equity securities classified as AFS are included in the consolidated balance sheets as a component of AOCI. The table below presents these amounts as of the dates indicated:

	March 31, 2017		December 31, 2016
	(In Millions)
AFS Securities:
Fixed maturities:
With OTTI loss	$	20	$	19
All other	605		428
Equity securities	1		—
Net Unrealized Gains (Losses)	$	626	$	447

Changes in net unrealized investment gains (losses) recognized in AOCI include reclassification adjustments to reflect amounts realized in Net earnings (loss) for the current period that had been part of OCI in earlier periods. The tables that follow below present a roll-forward of net unrealized investment gains (losses) recognized in AOCI, split between amounts related to fixed maturity securities on which an OTTI loss has been recognized and all other amounts:

Net Unrealized Gains (Losses) on Fixed Maturities with OTTI Losses

	Net Unrealized Gains (Losses) on Investments			DAC			Policyholders’ Liabilities			Deferred Income Tax Asset (Liability)			AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
	(In Millions)
Balance, January 1, 2017	$	19		$	(1	)	$	(10	)	$	(3	)	$	5
Net investment gains (losses) arising during the period	49			—			—			—			49
Reclassification adjustment for OTTI losses:
Included in Net earnings (loss)	(48		)	—			—			—			(48		)
Excluded from Net earnings (loss)	—			—			—			—			—
Impact of net unrealized investment gains (losses) on:
DAC	—			1			—			—			1
Deferred income taxes	—			—			—			(2		)	(2		)
Policyholders’ liabilities	—			—			5			—			5
Balance, March 31, 2017	$	20		$	—		$	(5	)	$	(5	)	$	10
Balance, January 1, 2016	$	16		$	—		$	(4	)	$	(5	)	$	7
Net investment gains (losses) arising during the period	10			—			—			—			10
Reclassification adjustment for OTTI losses:
Included in Net earnings (loss)	(17		)	—			—			—			(17		)
Excluded from Net earnings (loss)	—			—			—			—			—
Impact of net unrealized investment gains (losses) on:
DAC	—			—			—			—			—
Deferred income taxes	—			—			—			1			1
Policyholders’ liabilities	—			—			4			—			4
Balance, March 31, 2016	$	9		$	—		$	—		$	(4	)	$	5

All Other Net Unrealized Investment Gains (Losses) in AOCI

	Net Unrealized Gains (Losses) on Investments		DAC			Policyholders’ Liabilities			Deferred Income Tax Asset (Liability)			AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
	(In Millions)
Balance, January 1, 2017	$	428	$	(87	)	$	(189	)	$	(53	)	$	99
Net investment gains (losses) arising during the period	166		—			—			—			166
Reclassification adjustment for OTTI losses:
Included in Net earnings (loss)	12		—			—			—			12
Excluded from Net earnings (loss)(1)	—		—			—			—			—
Impact of net unrealized investment gains (losses) on:
DAC	—		(21		)	—			—			(21		)
Deferred income taxes	—		—			—			(74		)	(74		)
Policyholders’ liabilities	—		—			54			—			54
Balance, March 31, 2017	$	606	$	(108	)	$	(135	)	$	(127	)	$	236
Balance, January 1, 2016	$	674	$	(82	)	$	(213	)	$	(133	)	$	246
Net investment gains (losses) arising during the period	1,262		—			—			—			1,262
Reclassification adjustment for OTTI losses:
Included in Net earnings (loss)	16		—			—			—			16
Excluded from Net earnings (loss)(1)	23		—			—			—			23
Impact of net unrealized investment gains (losses) on:
DAC	—		25			—			—			25
Deferred income taxes	—		—			—			(432		)	(432		)
Policyholders’ liabilities	—		—			(93		)	—			(93		)
Balance, March 31, 2016	$	1,975	$	(57	)	$	(306	)	$	(565	)	$	1,047

(1) Represents “transfers out” related to the portion of OTTI losses during the period that were not recognized in earnings (loss) for securities with no prior OTTI loss.

The following tables disclose the fair values and gross unrealized losses of the 769 issues at March 31, 2017 and the 794 issues at December 31, 2016 of fixed maturities that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the specified periods at the dates indicated:

	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(In Millions)
March 31, 2017:
Fixed Maturity Securities:
Public corporate	$	2,511	$	66	$	129	$	6	$	2,640	$	72
Private corporate	1,256		37		252		17		1,508		54
U.S. Treasury, government and agency	4,626		582		—		—		4,626		582
States and political subdivisions	—		—		18		2		18		2
Foreign governments	39		2		34		6		73		8
Commercial mortgage-backed	50		1		177		52		227		53
Residential mortgage-backed	29		—		4		—		33		—
Asset-backed	3		—		8		1		11		1
Redeemable preferred stock	47		1		12		—		59		1
Total	$	8,561	$	689	$	634	$	84	$	9,195	$	773
December 31, 2016:
Fixed Maturity Securities:
Public corporate	$	2,455	$	75	$	113	$	6	$	2,568	$	81
Private corporate	1,483		38		277		17		1,760		55
U.S. Treasury, government and agency	5,356		624		—		—		5,356		624
States and political subdivisions	—		—		18		2		18		2
Foreign governments	73		3		49		11		122		14
Commercial mortgage-backed	66		5		171		67		237		72
Residential mortgage-backed	47		—		4		—		51		—
Asset-backed	4		—		8		1		12		1
Redeemable preferred stock	218		9		12		1		230		10
Total	$	9,702	$	754	$	652	$	105	$	10,354	$	859

The Company’s investments in fixed maturity securities do not include concentrations of credit risk of any single issuer greater than 10% of the consolidated equity of AXA Equitable, other than securities of the U.S. government, U.S. government agencies, and certain securities guaranteed by the U.S. government. The Company maintains a diversified portfolio of corporate securities across industries and issuers and does not have exposure to any single issuer in excess of 0.3% of total investments. The largest exposures to a single issuer of corporate securities held at March 31, 2017 and December 31, 2016 were $172 million and $169 million, respectively. Corporate high yield securities, consisting primarily of public high yield bonds, are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa3/BBB- or the National Association of Insurance Commissioners (“NAIC”) designation of 3 (medium grade), 4 or 5 (below investment grade) or 6 (in or near default). At March 31, 2017 and December 31, 2016, respectively, approximately $1,584 million and $1,574 million, or 4.9% and 4.9%, of the $32,471 million and $32,123 million aggregate amortized cost of fixed maturities held by the Company were considered to be other than investment grade. These securities had net unrealized losses of $10 million and $28 million at March 31, 2017 and December 31, 2016, respectively. At March 31, 2017 and December 31, 2016, respectively, the $84 million and $105 million of gross unrealized losses of twelve months or more were concentrated in U.S. Treasury securities. In accordance with the policy described in Note 2, the Company concluded that an adjustment to earnings for OTTI for these securities was not warranted at either March 31, 2017 or 2016. At March 31, 2017 and December 31, 2016, the Company did not intend to sell the securities nor will it likely be required to dispose of the securities before the anticipated recovery of their remaining amortized cost basis.

At March 31, 2017, the carrying value of fixed maturities that were non-income producing for the twelve months preceding that date was $4 million.

For the first quarters of 2017 and 2016, investment income is shown net of investment expenses of $19 million and $16 million, respectively.

At March 31, 2017 and December 31, 2016, respectively, the amortized cost of the Company’s trading account securities was $10,303 million and $9,177 million with respective fair values of $10,291 million and $9,134 million. Also at March 31, 2017 and December 31, 2016, respectively, trading securities included the General Account’s investment in Separate Accounts, which had carrying values of $63 million and $63 million and costs of $47 million and $46 million.

Net unrealized and realized gains (losses) on trading account equity securities are included in Net investment income (loss) in the consolidated statements of earnings (loss). The table below shows a breakdown of Net investment income from trading account securities during the first quarters of 2017 and 2016:

Net investment income (loss) from trading securities

	Three Months Ended March 31,
	2017		2016
	(In Millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period	$	51	$	64
Net investment gains (losses) recognized on securities sold during the period	2		(6		)
Unrealized and realized gains (losses) on trading securities arising during the period	53		58
Interest and dividend income from trading securities	40		19
Net investment income (loss) from trading securities	$	93	$	77

Mortgage Loans

Mortgage loans on real estate are placed on nonaccrual status once management determines the collection of accrued interest is doubtful. Once mortgage loans on real estate are classified as nonaccrual loans, interest income is recognized under the cash basis of accounting and the resumption of the interest accrual would commence only after all past due interest has been collected or the mortgage loan on real estate has been restructured to where the collection of interest is considered likely. At March 31, 2017 and December 31, 2016, the carrying values of commercial mortgage loans on real estate that had been classified as nonaccrual loans were $34 million and $34 million, respectively.

Troubled Debt Restructurings

The TDR mortgage loan shown in the table below has been modified six times since 2011. The modifications were to extend the maturity from its original maturity of March 5, 2017 to May 4, 2017 to provide additional time to finalize the sale of the remaining loan collateral. In November 2015, the recorded investment was reduced by $45 million in conjunction with the sale of the majority of the underlying collateral and $32 million from a charge-off. The remaining $15 million mortgage loan balance reflects the value of the remaining underlying collateral and cash held in escrow, supporting the mortgage loan. Since the fair market value of the underlying real estate and cash held in escrow collateral is the primary factor in determining the allowance for credit losses, modifications of loan terms typically have no direct impact on the allowance for credit losses, and therefore, no impact on the financial statements.

Troubled Debt Restructuring - Modifications

March 31, 2017

	Number of  Loans	Outstanding Recorded Investment
		Pre-Modification	Post - Modification
		(In Millions)
Commercial mortgage loans	1	15	15

There were no default payments on the above loan during the first quarter of 2017.

Valuation Allowances for Mortgage Loans:

Allowance for credit losses for commercial mortgage loans for the first quarters of 2017 and 2016 was as follows:

	2017		2016
Allowance for credit losses:	(In Millions)
Beginning balance, January 1,	$	8	$	6
Charge-offs	—		—
Recoveries	—		—
Provision	—		1
Ending balance, March 31,	$	8	$	7
March 31, Individually Evaluated for Impairment	$	8	$	7

There were no allowances for credit losses for agricultural mortgage loans for the first quarters of 2017 and 2016.

The following tables provide information relating to the loan-to-value and debt service coverage ratios for commercial and agricultural mortgage loans at March 31, 2017 and December 31, 2016, before adjustments for valuation allowance. The values used in these ratio calculations were developed as part of the periodic review of the commercial and agricultural mortgage loan portfolio, which includes an evaluation of the underlying collateral value.

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios

March 31, 2017

	Debt Service Coverage Ratio
Loan-to-Value Ratio:(2)	Greater than 2.0x		1.8x to 2.0x		1.5x to 1.8x		1.2x to 1.5x		1.0x to 1.2x		Less than 1.0x		Total Mortgage Loans
	(In Millions)
Commercial Mortgage Loans(1)
0% - 50%	$	726	$	95	$	303	$	55	$	—	$	—	$	1,179
50% - 70%	3,701		492		768		674		76		—		5,711
70% - 90%	282		19		252		127		28		46		754
90% plus	—		—		27		15		—		—		42
Total Commercial Mortgage Loans	$	4,709	$	606	$	1,350	$	871	$	104	$	46	$	7,686
Agricultural Mortgage Loans(1)
0% - 50%	$	255	$	140	$	296	$	468	$	290	$	52	$	1,501
50% - 70%	128		56		208		345		220		39		996
70% - 90%	—		—		2		4		—		—		6
90% plus	—		—		—		—		—		—		—
Total Agricultural Mortgage Loans	$	383	$	196	$	506	$	817	$	510	$	91	$	2,503
Total Mortgage Loans(1)
0% - 50%	$	981	$	235	$	599	$	523	$	290	$	52	$	2,680
50% - 70%	3,829		548		976		1,019		296		39		6,707
70% - 90%	282		19		254		131		28		46		760
90% plus	—		—		27		15		—		—		42
Total Mortgage Loans	$	5,092	$	802	$	1,856	$	1,688	$	614	$	137	$	10,189

(1) The debt service coverage ratio is calculated using the most recently reported net operating income results from property operations divided by annual debt service.

(2) The loan-to-value ratio is derived from current loan balance divided by the fair market value of the property. The fair market value of the underlying commercial properties is updated annually.

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios

December 31, 2016

	Debt Service Coverage Ratio
Loan-to-Value Ratio:(2)	Greater than 2.0x		1.8x to 2.0x		1.5x to 1.8x		1.2x to1.5x		1.0x to 1.2x		Less than 1.0x		Total Mortgage Loans
	(In Millions)
Commercial Mortgage Loans(1)
0% - 50%	$	738	$	95	$	59	$	56	$	—	$	—	$	948
50% - 70%	3,217		430		673		1,100		76		—		5,496
70% - 90%	282		65		229		127		28		46		777
90% plus	—		—		28		15		—		—		43
Total Commercial Mortgage Loans	$	4,237	$	590	$	989	$	1,298	$	104	$	46	$	7,264
Agricultural Mortgage Loans(1)
0% - 50%	$	254	$	138	$	296	$	468	$	286	$	49	$	1,491
50% - 70%	141		57		209		333		219		45		1,004
70% - 90%	—		—		2		4		—		—		6
90% plus	—		—		—		—		—		—		—
Total Agricultural Mortgage Loans	$	395	$	195	$	507	$	805	$	505	$	94	$	2,501
Total Mortgage Loans(1)
0% - 50%	$	992	$	233	$	355	$	524	$	286	$	49	$	2,439
50% - 70%	3,358		487		882		1,433		295		45		6,500
70% - 90%	282		65		231		131		28		46		783
90% plus	—		—		28		15		—		—		43
Total Mortgage Loans	$	4,632	$	785	$	1,496	$	2,103	$	609	$	140	$	9,765

(1) The debt service coverage ratio is calculated using the most recently reported net operating income results from property operations divided by annual debt service.

(2) The loan-to-value ratio is derived from current loan balance divided by the fair market value of the property. The fair market value of the underlying commercial properties is updated annually.

The following table provides information relating to the aging analysis of past due mortgage loans at March 31, 2017 and December 31, 2016, respectively, before adjustments for valuation allowance.

Age Analysis of Past Due Mortgage Loans

	30-59     Days		60-89     Days		90     Days     or >		Total		Current		Total Financing Receivables		Recorded Investment 90 Days or > and Accruing
							(In Millions)
March 31, 2017
Commercial	$	—	$	—	$	—	$	—	$	7,686	$	7,686	$	—
Agricultural	2		8		19		29		2,474		2,503		19
Total Mortgage Loans	$	2	$	8	$	19	$	29	$	10,160	$	10,189	$	19
December 31, 2016
Commercial	$	—	$	—	$	—	$	—	$	7,264	$	7,264	$	—
Agricultural	9		2		6		17		2,484		2,501		6
Total Mortgage Loans	$	9	$	2	$	6	$	17	$	9,748	$	9,765	$	6

The following table provides information regarding impaired mortgage loans at March 31, 2017 and December 31, 2016, respectively.

Impaired Mortgage Loans

	Recorded Investment		Unpaid Principal Balance		Related Allowance			Average Recorded Investment(1)		Interest Income Recognized
	(In Millions)
March 31, 2017:
With no related allowance recorded:
Commercial mortgage loans - other	$	15	$	15	$	—		$	15	$	—
Agricultural mortgage loans	—		—		—			—		—
Total	$	15	$	15	$	—		$	15	$	—
With related allowance recorded:
Commercial mortgage loans - other	$	27	$	27	$	(8	)	$	27	$	—
Agricultural mortgage loans	—		—		—			—		—
Total	$	27	$	27	$	(8	)	$	27	$	—
December 31, 2016:
With no related allowance recorded:
Commercial mortgage loans - other	$	15	$	15	$	—		$	22	$	—
Agricultural mortgage loans	—		—		—			—		—
Total	$	15	$	15	$	—		$	22	$	—
With related allowance recorded:
Commercial mortgage loans - other	$	27	$	27	$	(8	)	$	48	$	2
Agricultural mortgage loans	—		—		—			—		—
Total	$	27	$	27	$	(8	)	$	48	$	2

(1) Represents a four-quarter average of recorded amortized cost.

Derivatives and Offsetting Assets and Liabilities

The Company uses derivatives as part of its overall asset/liability risk management primarily to reduce exposures to equity market and interest rate risks. Derivative hedging strategies are designed to reduce these risks from an economic perspective and are all executed within the framework of a Derivative Use Plan approved by the NYDFS. Operation of these hedging programs is based on models involving numerous estimates and assumptions, including, among others, mortality, lapse, surrender and withdrawal rates, election rates, fund performance, market volatility and interest rates. A wide range of derivative contracts are used in these hedging programs, including exchange traded equity, currency and interest rate futures contracts, total return and/or other equity swaps, interest rate swap and floor contracts, bond and bond-index total return swaps, swaptions, variance swaps and equity options as well as bond and repo transactions to support the hedging. The derivative contracts are collectively managed in an effort to reduce the economic impact of unfavorable changes in guaranteed benefits’ exposures attributable to movements in capital markets.

Derivatives utilized to hedge exposure to Variable Annuities with Guarantee Features

The Company has issued and continues to offer certain variable annuity products with GMDB, GMIB and GIB features. The Company had previously issued certain variable annuity products with GWBL, GMWB and GMAB features (collectively, “GWBL and Other Features”). The risk associated with the GMDB feature is that under-performance of the financial markets could result in GMDB benefits, in the event of death, being higher than what accumulated policyholders’ account balances would support. The risk associated with the GMIB feature is that under-performance of the financial markets could result in the present value of GMIB benefits, in the event of annuitization, being higher than what accumulated policyholders’ account balances would support, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. The risk associated with the GIB and GWBL and Other Features is that under-performance of the financial markets could result in the GIB and GWBL and Other Features’ benefits being higher than what accumulated policyholders’ account balances would support.

For GMDB, GMIB, GIB and GWBL and Other Features, the Company retains certain risks including basis, credit spread and some volatility risk and risk associated with actual versus expected assumptions for mortality, lapse and surrender, withdrawal and contractholder election rates, among other things. The derivative contracts are managed to correlate with changes in the value of the GMDB, GMIB, GIB and GWBL and Other Features that result from financial markets movements. A portion of exposure to realized equity volatility is hedged using equity options and variance swaps and a portion of exposure to credit risk is hedged using total return swaps on fixed income indices. Additionally, the Company is party to total return swaps for which the reference U.S. Treasury securities are contemporaneously purchased from the market and sold to the swap counterparty. As these transactions result in a transfer of control of the U.S. Treasury securities to the swap counterparty, the Company derecognizes these securities with consequent gain or loss from the sale. The Company has also purchased reinsurance contracts to mitigate the risks associated with GMDB features and the impact of potential market fluctuations on future policyholder elections of GMIB features contained in certain annuity contracts issued by the Company.

The Company has in place a hedge program utilizing interest rate swaps to partially protect the overall profitability of future variable annuity sales against declining interest rates.

Derivatives utilized to hedge crediting rate exposure on SCS, SIO, MSO and IUL products/investment options

The Company hedges crediting rates in the SCS variable annuity, SIO in the EQUI-VEST® variable annuity series, MSO in the variable life insurance products and IUL insurance products. These products permit the contract owner to participate in the performance of an index, ETF or commodity price movement up to a cap for a set period of time. They also contain a protection feature, in which the Company will absorb, up to a certain percentage, the loss of value in an index, ETF or commodity price, which varies by product segment.

In order to support the returns associated with these features, the Company enters into derivative contracts whose payouts, in combination with fixed income investments, emulate those of the index, ETF or commodity price, subject to caps and buffers.

Derivatives utilized to hedge risks associated with interest-rate risk arising from issuance of funding agreements

The Company issues fixed and floating rate funding agreements to fund originated non-recourse commercial real estate mortgage loans, the terms of which may result in short term economic interest rate risk between mortgage loan commitment and mortgage loan funding. The company uses forward interest-rate swaps to protect against interest rate fluctuations during this period.  Realized gains and losses from the forward interest rate swaps are amortized over the life of the loan in interest credited to policyholder’s account balances.

Derivatives utilized to hedge equity market risks associated with the General Account’s seed money investments in Separate Accounts, retail mutual funds and Separate Account fee revenue fluctuations

The Company’s General Account seed money investments in Separate Account equity funds and retail mutual funds exposes the Company to market risk, including equity market risk, which is partially hedged through equity-index futures contracts to minimize such risk.

Periodically, the Company enters into derivatives on equity indices to mitigate the impact on net earnings from Separate Account fee revenue fluctuations due to movements in the equity markets. These positions partially cover fees expected to be earned from the Company’s Separate Account products.

Derivatives utilized for General Account Investment Portfolio

The Company maintains a strategy in its General Account investment portfolio to replicate the credit exposure of fixed maturity securities otherwise permissible for investment under its investment guidelines through the sale of CDSs. Under the terms of these swaps, the Company receives quarterly fixed premiums that, together with any initial amount paid or received at trade inception, replicate the credit spread otherwise currently obtainable by purchasing the referenced entity’s bonds of similar maturity. These credit derivatives generally have remaining terms of five years or less and are recorded at fair value with changes in fair value, including the yield component that emerges from initial amounts paid or received, reported in Net investment income (loss). The Company manages its credit exposure taking into consideration both cash and derivatives based positions and selects the reference entities in its replicated credit exposures in a manner consistent with its selection of fixed maturities. In addition, the Company generally transacts the sale of CDSs in single name reference entities of investment grade credit quality and with counterparties subject to collateral posting requirements. If there is an event of default by the reference entity or other such credit event as defined under the terms of the swap contract, the Company is obligated to perform under the credit derivative and, at the counterparty’s option, either pay the referenced amount of the contract less an auction-determined recovery amount or pay the referenced amount of the contract and receive in return the defaulted or similar security of the reference entity for recovery by sale at the contract settlement auction. To date, there have been no events of default or circumstances indicative of a deterioration in the credit quality of the named referenced entities to require or suggest that the Company will have to perform under these CDSs. The maximum potential amount of future payments the Company could be required to make under these credit derivatives is limited to the par value of the referenced securities which is the dollar-equivalent of the derivative notional amount. The Standard North American CDS Contract (“SNAC”) under which the Company executes these CDS sales transactions does not contain recourse provisions for recovery of amounts paid under the credit derivative.

Periodically, the Company purchases TIPS and other sovereign bonds, both inflation linked and non-inflation linked, as General Account investments and enters into asset or cross-currency basis swaps, to result in payment of the given bond’s coupons and principal at maturity in the bond’s specified currency to the swap counterparty, in return for fixed dollar amounts. These swaps, when considered in combination with the bonds, together result in a net position that is intended to replicate a dollar-denominated fixed-coupon cash bond with a yield higher than a term-equivalent U.S. Treasury bond. At March 31, 2017 and December 31, 2016, respectively, the Company’s unrealized gains (losses) related to this program were $94 million and $97 million and reported in AOCI.

The Company hedges a portion of the credit exposure in its General Account investment portfolio by buying protection through a swap. Under the terms of these swaps, the Company pays quarterly fixed premiums that, together with any initial amount paid or received at trade inception, serve as premiums paid to hedge the risk arising from multiple defaults of bonds referenced in the CDX index. These credit derivatives have terms of five years or less and are recorded at fair value with changes in fair value, including the yield component that emerges from initial amounts paid or received, reported in Net investment income (loss) from derivative instruments.

During third quarter 2016, the Company implemented a program to mitigate its duration gap using total return swaps for which the reference U.S. Treasury securities are sold to the swap counterparty under arrangements economically similar to repurchase agreements.  As these transactions result in a transfer of control of the U.S. Treasury securities to the swap counterparty, the Company derecognizes these securities with consequent gain or loss from the sale.  In 2016, the Company derecognized approximately $995 million U.S. Treasury securities for which the Company received proceeds of approximately $1,007 million at inception of the total return swap contract.  Under the terms of these swaps, the Company retains ongoing exposure to the total returns of the underlying U.S. Treasury securities in exchange for a financing cost. At March 31, 2017, the aggregate fair value of  U.S. Treasury securities derecognized under this program was approximately $852 million. Reported in Other invested assets in the Company's balance sheet at March 31, 2017 is approximately $102 million, representing the fair value of the total return swap contracts.

The tables below present quantitative disclosures about the Company’s derivative instruments, including those embedded in other contracts required to be accounted for as derivative instruments.

Derivative Instruments by Category

	At March 31, 2017						Gains (Losses) Reported In Net Earnings (Loss) Three Months Ended March 31, 2017
			Fair Value
	Notional Amount		Asset Derivatives		Liability Derivatives
	(In Millions)
Freestanding derivatives:
Equity contracts:(1)
Futures	$	4,655	$	1	$	2	$	(212	)
Swaps	4,017		3		123		(241		)
Options	12,757		2,336		1,157		302
Interest rate contracts:(1)
Floors	—		—		—		—
Swaps	18,227		243		385		108
Futures	8,223		—		—		(19		)
Credit contracts:(1)
Credit default swaps	2,752		23		11		6
Other freestanding contracts:(1)
Cross currency swaps	870		36		14		(1		)
Margin	—		84		8		—
Collateral	—		68		1,024		—
Net investment income (loss)							(57		)
Embedded derivatives:
GMIB reinsurance contracts	—		9,795		—		(514		)
GIB and GWBL and Other Features(2)	—		—		106		(58		)
SCS, SIO, MSO and IUL indexed features(3)	—		—		1,099		(301		)
Total	$	51,501	$	12,589	$	3,929	$	(930	)

(1) Reported in Other invested assets in the consolidated balance sheets.

(2) Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.

(3) SCS and SIO indexed features are reported in Policyholders’ account balances; MSO and IUL indexed features are reported in Future policyholders’ benefits and other policyholders’ liabilities in the consolidated balance sheets.

	At December 31, 2016						Gains (Losses) Reported In Net Earnings (Loss) Three Months Ended March 31, 2016
			Fair Value
	Notional Amount		Asset Derivatives		Liability Derivatives
	(In Millions)
Freestanding derivatives:
Equity contracts:(1)
Futures	$	5,086	$	1	$	1	$	(86	)
Swaps	3,529		13		67		(9		)
Options	11,465		2,114		1,154		34
Interest rate contracts:(1)
Floors	1,500		11		—		4
Swaps	18,933		246		1,163		851
Futures	6,926		—		—		(46		)
Swaptions	—		—		—		—
Credit contracts:(1)
Credit default swaps	2,757		20		15		1
Other freestanding contracts:(1)
Foreign currency contracts	730		52		6		(1		)
Margin			107		6		—
Collateral			712		748		—
Net investment income (loss)							748
Embedded derivatives:
GMIB reinsurance contracts	—		10,309		—		1,637
GIB and GWBL and Other Features(2)	—		—		164		(81		)
SCS, SIO, MSO and IUL indexed features(3)	—		—		887		(33		)
Total	$	50,926	$	13,585	$	4,211	$	2,271

(1) Reported in Other invested assets in the consolidated balance sheets.

(2) Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.

(3) SCS and SIO indexed features are reported in Policyholders’ account balances; MSO and IUL indexed features are reported in Future policyholders’ benefits and other policyholders’ liabilities in the consolidated balance sheets

Equity-Based and Treasury Futures Contracts

All outstanding equity-based and treasury futures contracts at March 31, 2017 are exchange-traded and net settled daily in cash. At March 31, 2017, the Company had open exchange-traded futures positions on: (i) the S&P 500, Russell 2000, and Emerging Market indices, having initial margin requirements of $191 million, (ii) the 2-year, 5-year and 10-year U.S. Treasury Notes on U.S. Treasury bonds and ultra-long bonds, having initial margin requirements of $21 million and (iii) the Euro Stoxx, FTSE 100, Topix, ASX 200, and European, Australasia, and Far East (“EAFE”) indices as well as corresponding currency futures on the Euro/U.S. dollar, Pound/U.S. dollar, Australian dollar/U.S. dollar, and Yen/U.S. dollar, having initial margin requirements of $14 million.

Credit Risk

Although notional amount is the most commonly used measure of volume in the derivatives market, it is not used as a measure of credit risk. A derivative with positive fair value (a derivative asset) indicates existence of credit risk because the counterparty would owe money to the Company if the contract were closed at the reporting date. Alternatively, a derivative contract with negative fair value (a derivative liability) indicates the Company would owe money to the counterparty if the contract were closed at the reporting date. To reduce credit exposures in OTC derivative transactions the Company generally enters into master agreements that provide for a netting of financial exposures with the counterparty and allow for collateral arrangements as further described below under “ISDA Master Agreements.” The Company further controls and minimizes its counterparty exposure through a credit appraisal and approval process.

ISDA Master Agreements

Netting Provisions. The standardized “ISDA Master Agreement” under which the Company conducts its OTC derivative transactions includes provisions for payment netting. In the normal course of business activities, if there is more than one derivative transaction with a single counterparty, the Company will set-off the cash flows of those derivatives into a single amount to be exchanged in settlement of the resulting net payable or receivable with that counterparty. In the event of default, insolvency, or other similar event pre-defined under the ISDA Master Agreement that would result in termination of OTC derivatives transactions before their maturity, netting procedures would be applied to calculate a single net payable or receivable with the counterparty.

Collateral Arrangements. The Company generally has executed a CSA under the ISDA Master Agreement it maintains with each of its OTC derivative counterparties that requires both posting and accepting collateral either in the form of cash or high-quality securities, such as U.S. Treasury securities, U.S. government and government agency securities and investment grade corporate bonds. These CSAs are bilateral agreements that require collateral postings by the party “out-of-the-money” or in a net derivative liability position. Various thresholds for the amount and timing of collateralization of net liability positions are applicable. Consequently, the credit exposure of the Company’s OTC derivative contracts is limited to the net positive estimated fair value of those contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to CSAs. Derivatives are recognized at fair value in the consolidated balance sheets and are reported either as assets in Other invested assets or as liabilities in Other liabilities, except for embedded insurance-related derivatives as described above and derivatives transacted with a related counterparty. The Company nets the fair value of all derivative financial instruments with counterparties for which an ISDA Master Agreement and related CSA have been executed.

At March 31, 2017 and December 31, 2016, respectively, the Company held $1,024 million and $755 million in cash and securities collateral delivered by trade counterparties, representing the fair value of the related derivative agreements. This unrestricted cash collateral is reported in Cash and cash equivalents. The aggregate fair value of all collateralized derivative transactions that were in a liability position with trade counterparties at March 31, 2017 and December 31, 2016, respectively, were $47 million and $700 million, for which the Company posted collateral of $68 million and $820 million at March 31, 2017 and December 31, 2016, respectively, in the normal operation of its collateral arrangements. Certain of the Company’s ISDA Master Agreements contain contingent provisions that permit the counterparty to terminate the ISDA Master Agreement if the Company’s credit rating falls below a specified threshold, however, the occurrence of such credit event would not impose additional collateral requirements.

Margin

Effective January 3, 2017, the Chicago Mercantile Exchange (“CME”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives for which the CME serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $82 million and gross derivative liabilities by $8 million.

Securities Repurchase and Reverse Repurchase Transactions

Securities repurchase and reverse repurchase transactions are conducted by the Company under a standardized securities industry master agreement, amended to suit the specificities of each respective counterparty. These agreements generally provide detail as to the nature of the transaction, including provisions for payment netting, establish parameters concerning the ownership and custody of the collateral securities, including the right to substitute collateral during the term of the agreement, and provide for remedies in the event of default by either party. Amounts due to/from the same counterparty under these arrangements generally would be netted in the event of default and subject to rights of set-off in bankruptcy. The Company’s securities repurchase and reverse repurchase agreements are accounted for as secured borrowing or lending arrangements, respectively and are reported in the consolidated balance sheets on a gross basis. The Company obtains or posts collateral generally in the form of cash and U.S. Treasury, corporate and government agency securities. The fair value of the securities to be repurchased or resold are monitored on a daily basis with additional collateral posted or obtained as necessary. Securities to be repurchased or resold are the same, or substantially the same, as those initially transacted under the arrangement. At March 31, 2017 and December 31, 2016, there were no balances outstanding under reverse repurchase transactions. At March 31, 2017 and December 31, 2016, the balance outstanding under securities repurchase transactions was $1,784 million and $1,996 million, respectively. The Company utilized these repurchase and reverse repurchase agreements for asset liability and cash management purposes. For other instruments used for asset liability management purposes, see “Obligation under funding agreements” included in Note 12.

The following table presents information about the Insurance Segment’s offsetting of financial assets and liabilities and derivative instruments at March 31, 2017.

Offsetting Financial Assets and Liabilities and Derivative Instruments

At March 31, 2017

	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheets			Net Amounts Presented in the Balance Sheets
	(In Millions)
ASSETS(1)
Description
Derivatives:
Equity contracts	$	2,339	$	1,279		$	1,060
Interest rate contracts	242		384			(142		)
Credit contracts	22		11			11
Currency	30		9			21
Margin	84		8			76
Collateral	68		1,024			(956		)
Total Derivatives, subject to an ISDA Master Agreement	2,785		2,715			70
Total Derivatives, not subject to an ISDA Master Agreement	—		—			—
Total Derivatives	2,785		2,715			70
Other financial instruments	1,976		(6		)	1,982
Other invested assets	$	4,761	$	2,709		$	2,052
Securities purchased under agreement to resell	$	—	$	—		$	—
LIABILITIES(2)
Description
Derivatives:
Equity contracts	$	1,279	$	1,279		$	—
Interest rate contracts	384		384			—
Credit contracts	11		11			—
Currency	9		9			—
Margin	—		—			—
Collateral	1,024		1,024			—
Total Derivatives, subject to an ISDA Master Agreement	2,707		2,707			—
Total Derivatives, not subject to an ISDA Master Agreement	—		—			—
Total Derivatives	2,707		2,707			—
Other financial liabilities	2,271		—			2,271
Other liabilities	$	4,978	$	2,707		$	2,271
Securities sold under agreement to repurchase(3)	$	1,782	$	—		$	1,782

(1) Excludes Investment Management segment’s $33 million net derivative assets (including derivative assets of consolidated VIEs), $2 million long exchange traded options and $147 million of securities borrowed.

(2) Excludes Investment Management segment’s $15 million net derivative liabilities (including derivative liabilities of consolidated VIEs) and $1 million short exchange traded options.

(3) Excludes expense of $2 million in securities sold under agreement to repurchase.

The following table presents information about the Insurance segment’s gross collateral amounts that are not offset in the consolidated balance sheets at March 31, 2017.

Gross Collateral Amounts Not Offset in the Consolidated Balance Sheets

At March 31, 2017

	Net Amounts Presented in the Balance Sheets			Collateral (Received)/Held
				Financial Instruments			Cash			Net Amounts
	(In Millions)
ASSETS:(1)
Counterparty A	$	51		$	—		$	(49	)	$	2
Counterparty B	(22		)	—			25			3
Counterparty C	(7		)	—			24			17
Counterparty D	159			—			(160		)	(1		)
Counterparty E	17			—			(16		)	1
Counterparty F	84			—			(80		)	4
Counterparty G	262			—			(261		)	1
Counterparty H	188			—			(188		)	—
Counterparty I	(16		)	—			17			1
Counterparty J	(72		)	—			77			5
Counterparty K	94			—			(93		)	1
Counterparty L	(2		)	—			2			—
Counterparty M	53			—			(39		)	14
Counterparty N	—			—			—			—
Counterparty Q	12			—			(11		)	1
Counterparty T	17			—			(17		)	—
Counterparty U	15			—			(1		)	14
Counterparty V	118			—			(111		)	$	7
Total derivatives	$	951		$	—		$	(881	)	$	70
Other financial instruments	1,982			—			—			1,982
Other invested assets	$	2,933		$	—		$	(881	)	$	2,052
Securities purchased under agreement to resell	$	—		$	—		$	—		$	—
LIABILITIES:(2)
Counterparty D	$	891		$	(877	)	$	(11	)	$	3
Counterparty M	274			(274		)	(2		)	(2		)
Counterparty C	268			(262		)	(4		)	2
Counterparty H	110			(108		)	(2		)	—
Counterparty W	239			(235		)	(3		)	1
Securities sold under agreement to repurchase (3)	$	1,782		$	(1,756	)	$	(22	)	$	4

(1) Excludes Investment Management segment’s cash collateral received of $1 million related to derivative assets (including those related to derivative assets of consolidated VIEs) and $147 million related to securities borrowed.

(2) Excludes Investment Management segment’s cash collateral pledged of $13 million related to derivative liabilities (including those related to derivative liabilities of consolidated VIEs).

(3) Excludes expense of $2 million in securities sold under agreement to repurchase.

The following table presents information about repurchase agreements accounted for as secured borrowings in the consolidated balance sheets at March 31, 2017.

Repurchase Agreement Accounted for as Secured Borrowings⁽¹⁾

	At March 31, 2017
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 days		30–90 days		Greater Than 90 days		Total
	(In Millions)
Securities sold under agreement to repurchase(2)
U.S. Treasury and agency securities	$	—	$	1,782	$	—	$	—	$	1,782
Total	$	—	$	1,782	$	—	$	—	$	1,782
Securities purchased under agreement to resell
Corporate securities	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	—

(1) Excludes Investment Management segment’s $147 million of securities borrowed.

(2) Excludes expense accrual of $2 million in securities sold under agreement to repurchase.

The following table presents information about the Insurance segment’s offsetting financial assets and liabilities and derivative instruments at December 31, 2016.

Offsetting Financial Assets and Liabilities and Derivative Instruments

At December 31, 2016

	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheets		Net Amounts Presented in the Balance Sheets
	(In Millions)
ASSETS(1)
Description
Derivatives:
Equity contracts	$	2,128	$	1,219	$	909
Interest rate contracts	253		1,162		(909		)
Credit contracts	20		14		6
Currency	48		1		47
Margin	107		6		101
Collateral	712		747		(35		)
Total Derivatives, subject to an ISDA Master Agreement	3,268		3,149		119
Total Derivatives, not subject to an ISDA Master Agreement	4		—		4
Total Derivatives	3,272		3,149		123
Other financial instruments	2,063		—		2,063
Other invested assets	$	5,335	$	3,149	$	2,186
Securities purchased under agreement to resell	$	—	$	—	$	—
LIABILITIES(2)
Description
Derivatives:
Equity contracts	$	1,219	$	1,219	$	—
Interest rate contracts	1,162		1,162		—
Credit contracts	14		14		—
Currency	1		1		—
Margin	6		6		—
Collateral	747		747		—
Total Derivatives, subject to an ISDA Master Agreement	3,149		3,149		—
Total Derivatives, not subject to an ISDA Master Agreement	—		—		—
Total Derivatives	3,149		3,149		—
Other financial liabilities	2,108		—		2,108
Other liabilities	$	5,257	$	3,149	$	2,108
Securities sold under agreement to repurchase(3)	$	1,992	$	—	$	1,992

(1) Excludes Investment Management segment’s $13 million net derivative assets(including derivative assets of consolidated VIEs), $3 million long exchange traded options and $83 million of securities borrowed.

(2) Excludes Investment Management segment’s $11 million net derivative liabilities(including derivative liabilities of consolidated VIEs), $1 million short exchange traded options and $10 million of securities loaned.

(3) Excludes expense of $4 million in securities sold under agreement to repurchase.

The following table presents information about the Insurance segment’s gross collateral amounts that are not offset in the consolidated balance sheets at December 31, 2016.

Gross Collateral Amounts Not Offset in the Consolidated Balance Sheets

At December 31, 2016

	Net Amounts Presented in the Balance Sheets			Collateral (Received)/Held
				Financial Instruments			Cash			Net Amounts
	(In Millions)
ASSETS:(1)
Counterparty A	$	46		$	—		$	(48	)	$	(2	)
Counterparty B	(128		)	—			132			4
Counterparty C	(116		)	—			138			22
Counterparty D	182			—			(176		)	6
Counterparty E	(65		)	—			83			18
Counterparty F	(3		)	—			16			13
Counterparty G	219			—			(214		)	5
Counterparty H	104			—			(110		)	(6		)
Counterparty I	(188		)	—			203			15
Counterparty J	(93		)	—			115			22
Counterparty K	92			—			(96		)	(4		)
Counterparty L	(3		)	—			3			—
Counterparty M	(105		)	—			120			15
Counterparty N	4			—			—			4
Counterparty Q	10			—			(11		)	(1		)
Counterparty T	—			—			2			2
Counterparty U	1			—			10			11
Counterparty V	96			—			(101		)	(5		)
Total Derivatives	$	53		$	—		$	66		$	119
Other financial instruments	2,067			—			—			2,067
Other invested assets	$	2,120		$	—		$	66		$	2,186
Counterparty M	$	—		$	—		$	—		$	—
Counterparty V	—			—			—			—
Securities purchased under agreement to resell	$	—		$	—		$	—		$	—
LIABILITIES(2)
Counterparty D	$	767		$	(767	)	$	—		$	—
Counterparty M	410			(410		)	—			—
Counterparty C	302			(296		)	(2		)	4
Counterparty W	513			(513		)	—			—
Securities sold under agreement to repurchase(3)	$	1,992		$	(1,986	)	$	(2	)	$	4

(1) Excludes Investment Management segment’s cash collateral received of $1 million related to derivative assets (including those related to derivative assets of consolidated VIEs) and $83 million related to securities borrowed.

(2) Excludes Investment Management segment’s cash collateral pledged of $8 million related to derivative liabilities (including those related to derivative liabilities of consolidated VIEs).

(3) Excludes expense of $4 million in securities sold under agreement to repurchase.

The following table presents information about repurchase agreements accounted for as secured borrowings in the consolidated balance sheets at December 31, 2016.

Repurchase Agreement Accounted for as Secured Borrowings⁽¹⁾ 

	At December 31, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 days		30–90 days		Greater  Than 90 days		Total
	(In Millions)
Securities sold under agreement to repurchase(2)
U.S. Treasury and agency securities	$	—	$	1,992	$	—	$	—	$	1,992
Total	$	—	$	1,992	$	—	$	—	$	1,992

(1) Excludes Investment Management segment’s $83 million of securities borrowed.

(2) Excludes expense of $4 million in securities sold under agreement to repurchase.